Student Loans and Financial Loans 'Integrated Debt Adjustment' to Be Implemented Starting Next Year

Applying to the Credit Recovery Committee Enables Debt Adjustment
Support Includes Up to 30% Principal Reduction and Overdue Interest Relief

[Asia Economy Reporter Han Jinju] Starting January next year, an 'integrated debt adjustment' will be implemented for young multi-debtors who are burdened with both student loans and financial sector loans. When applying for integrated debt adjustment, all debt repayment demands will be suspended, and support such as principal reduction and delinquent interest reduction will be provided.

On the 22nd, the Ministry of Education, the Financial Services Commission, the Korea Student Aid Foundation, and the Credit Recovery Committee signed a business agreement to support the reduction of debt burdens for youth. The Korea Student Aid Foundation and the Credit Recovery Committee also agreed to cooperate on scholarship projects to prevent youth debt recurrence and provide credit and financial education necessary for recovery, as well as support for vulnerable students.

The agreement institutions have prepared an integrated debt adjustment system for multi-debtors who have both student loans and financial sector loans to help youth recover, considering employment difficulties caused by COVID-19.

Once the newly introduced integrated debt adjustment is implemented, multi-debtors who apply for debt adjustment at the Credit Recovery Committee will have all debt repayment demands suspended and be able to receive unified debt adjustment without separately applying to the Korea Student Aid Foundation.

Previously, debt adjustment had to be applied for separately to the Korea Student Aid Foundation and the Credit Recovery Committee. Principal reduction for student loans was only available in cases of death or severe mental or physical disability, and debt adjustment was limited to general repayment student loans.

Through integrated debt adjustment, the principal of student loans can be reduced by up to 30%. All delinquent interest will also be waived, and the installment repayment period will be extended from a maximum of 10 years to 20 years. A fee (50,000 KRW per individual) will also be waived when student loan debtors apply for debt adjustment.

The support targets are those who have been delinquent on student loans for more than 3 months, including ▲ government-guaranteed student loans ▲ general repayment student loans ▲ income-contingent student loans (after mandatory repayment begins).

From 2022, about 20,000 people, with principal amounting to 100 billion KRW, will be able to receive student loan debt adjustment. The Korea Student Aid Foundation has joined the 'Credit Recovery Support Agreement' to include student loans as a target for debt adjustment by the Credit Recovery Committee.

Ko Seung-beom, Chairman of the Financial Services Commission, said, "In the reality where the employment situation for young people is not easy due to the prolonged COVID-19 pandemic, more active credit recovery support measures are needed to prevent young people entering society from falling into the quagmire of delinquency." He added, "We expect this agreement to be a great help to young people who have had a heavy burden of multiple debts."

Deputy Prime Minister and Minister of Education Yoo Eun-hye stated, "Based on a consensus among various ministries and agencies that the difficulties of young people due to COVID-19 and employment difficulties must be resolved, we have prepared support measures that young people can feel directly." She added, "We will strengthen inter-ministerial cooperation to alleviate the difficulties of young people and strive to improve their lives."

This content was produced with the assistance of AI translation services.